October 1, 2014

Washington Budget Report: March 25, 2014

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Budget Process Reforms Hold Bipartisan Appeal

Although elected officials must make politically difficult choices to put the government’s finances on a sustainable path, some reforms in the congressional budget process could help.

And as several budget experts made clear in a recent panel discussion on Capitol Hill, some of the proposed reforms hold bipartisan appeal.

The Concord Coalition and Rep. Reid Ribble hosted the program. Much of it focused on the benefits of shifting to a two-year budget cycle and making the federal debt limit more meaningful and effective.

Robert L. Bixby, Concord’s executive director, said Congress is actually experimenting with a two-year budget now with the Ryan-Murray agreement, which set discretionary spending caps for two fiscal years. He also advocates setting 20-year targets for debt-to-GDP ratios.

Gordon Gray of the American Action Forum said politicians sometimes blame the budget process to absolve themselves of responsibility for gridlock. But he agreed some process reforms would help.

Steve Bell of the Bipartisan Policy Center said any new budget enforcement mechanism must be more rational than the current debt ceiling. Jim Kessler of Third Way said the government should never come as close to defaulting as it did last year.

Ed Lorenzen of the Committee for a Responsible Federal Budget said the debt limit should be raised at the same time tax and spending decisions are made.

The panelists also agreed that Congress must ultimately address mandatory spending programs such as Social Security, Medicare and Medicaid.

 

No Time for Complacency

The economic recovery and some steps by elected officials have reduced deficits over the past few years. But they will soon rise again and Washington has done little to deal with the key drivers of long-term budget shortfalls: an aging population and the rising costs of health care, entitlement programs and an outdated tax code.

“In just a few years, the debt – already quite high by historical standards -- is projected to rise as a share of our economy again and to continue doing so indefinitely after that,” Jason Peuquet and Joshua Gordon warn in a recent guest column in the San Jose Mercury News.

Gordon, The Concord Coalition’s policy director, and Peuquet, a research fellow with the Committee for a Responsible Federal Budget, will present Principles and Priorities, a federal budget exercise, in the San Jose area this Friday. The program is hosted by Concord, Fix the Debt and U.S. Rep. Anna Eshoo (D-Calif.).

Fortunately, Peuquet and Gordon write, there are some fresh opportunities “to put the conversation about unsustainable debt back on the agenda.” These include a bipartisan effort to reform Medicare payments and new tax proposals by President Obama and U.S. Rep. Dave Camp (R-Mich.).

Low Savings Could Mean Trouble for Many Workers

Personal savings are an essential part of good retirement planning, particularly as the needs of an aging U.S. population put increasing strain on the federal budget. Workers can expect to need substantial amounts of money to help pay their living expenses, medical bills and other costs in retirement.

Yet this year’s “Retirement Confidence Survey” by the Employee Benefit Research Institute warns: “A sizeable percentage of workers report that they have virtually no savings and investments.” Well over a third of the respondents -- 36 percent -- reported savings of less than $1,000. 

With the economy strengthening, the percentage of workers who expressed confidence about having enough money for a comfortable retirement had predictably risen from the record lows between 2009 and 2013. But this increased confidence was seen “almost exclusively among those with higher household income.”

House Panel Focusing on Risks of High Debt

The nation’s current fiscal path threatens to leave future generations of Americans with less opportunity and reduced prosperity, according to a staff memorandum in advance of a timely House hearing today on the consequences of a large and rising federal debt.

“While the short-term budget outlook has improved temporarily from where it stood in 2009 and 2010, the U.S. still faces a long-term fiscal picture that experts from across the political spectrum agree is bleak,” the majority staff of the Committee on Financial Services said in the memorandum.

The hearing, “Why Debt Matters,” was to include testimony from three experts who have previously spoken at Concord Coalition forums around the country: David Cote, chairman and CEO of Honeywell International; Alice Rivlin, senior fellow at The Brookings Institution, and Douglas Holtz-Eakin, president of the American Action Forum.

Jared Bernstein of the Center on Budget and Policy Priorities is also scheduled to testify.